Disclosure rules for people selling properties with defective cladding are not tight enough, says Auckland Property Investors Association president David Whitburn.
By Susan Edmunds
He said tens of thousands of homeowners were in negative equity due to owning leaky properties and properties that had defective cladding but were yet to leak.
He said that was often almost a worse situation to be in than owning an outright leaky building.
And despite extensive media coverage of the problems with leaky buildings, he said people were still buying properties without doing due diligence.
“It’s still really common to have people losing hundreds of thousands of dollars in the Auckland property market. I don’t think the disclosure is adequate, there’s no requirement to disclose defective cladding types.”
Real estate agent Keith Ward said leaky properties sold for just $20,000 to $50,000 more than their land value.
Whitburn was worried about people who took out large mortgages at the height of the boom to buy defective properties.
In many cases, their loans could now be almost double what the property was worth.
“They often have 95% loans because the valuer didn’t pick it up. It’s still happening in the market.”
In many cases, people would not realise what a problem they had until they tried to sell the house again. “There’s massive wealth destruction going on.”
Ward owned a leaky house in Parnell himself and lost $350,000 on it. He said anyone who had bought a leaky property since 2007 would lose money on it.
“You’re stuck between the devil and the deep blue sea.”
He said low interest rates were giving buyers confidence to get into the property market and if leaky-home owners were thinking about biting the bullet and selling, now was a good time to do so.
Whitburn agreed: “A lot of people are really squeezed by cashflow and higher interest rates will disproportionately affect these people.”
He called on banks to offer reduced interest rates to those stuck in negative equity due to leaks, as they had done for those affected by the Christchurch earthquakes.
Ward said: “It’s a horrific situation to be in, and I say that from my own experience.”
But Whitburn said he felt what he could do was limited. “If people are going to turn a blind eye and not take the proper checks, then people are going to continue to be caught out. That’s life.”
He said the 10-year time limit on the financial assistance package for home owners, which provided 25% of the repair costs from the Government and 25% from local councils, had also created a ticking time bomb as people discovered too late that they had a problem.